How to Invest in Share Market? | Beginners Guide

Do you want to know how to invest in share market?


but don’t know how to do it? 

Don’t worry, read our guide and learn how to invest in Indian share market. 

What are shares?

Let us first understand the meaning of shares before investing in the share market.

Shares are financial instruments that help the company in raising funds.

For instance – A company which is making a profit by selling biscuits for quite some time and decides to enter into a new product line such as juices.

Such an expansion would require more funds. The most effective way to raise capital is by issuing shares to the public as it does not require any interest payment. 

In this scenario, the person who invests in this business and believes in this business idea becomes the shareholder of the company.

How to Invest in Share Market? 

Well, now we got a basic understanding of shares. The two things which you need to invest in share market are a bank account and a Demat account. 

A bank account is required for buying shares and receiving money when selling those shares. Some banks also offer a 3 in 1 account which includes Demat, savings, and trading account.

What are Trading and Demat accounts? 

A person needs a trading account for buying and selling shares in the stock market. Once the person buys the shares of a particular company they are stored in dematerialized form in a Demat account.

Both these accounts can be opened with a Sebi registered broker also known as a depository participant. There are various electronic platforms such as Groww, Upstoxs, Zerodha that open the trading and Demat account of an investor in a hassle-free manner.

Documents Required for Opening the DEMAT account: 

  • Pan Card
  • Address proof
  • Passport size photographs
  • A canceled cheque from your savings bank account

Type of markets

Before you start investing in shares,  you should know about the types of markets. 

One is primary and the other is secondary.

The secondary market is the place where buying and selling of securities between two investors take place with the help of a SEBI registered broker as discussed above. However, a beginner should know the difference between a primary and a secondary market.

Basis of ComparisonPrimary MarketSecondary Market
MeaningIt is the market where a company raises capital mainly through IPO or FPO for the first time.It is the market where securities are traded between two investors .i.e one buys and the other sells. Eg – NSE and BSE
IntermediaryUnderwriters are the intermediaries in the primary market.Brokers are the intermediaries in the secondary market
PriceThe company sells the shares to the investors at a fixed price.Buyers and sellers determine the price of the stock based on market demand and supply.

Market Timings

Before investing in shares, one must know the market timing of the secondary market i.e 9 am to 4 pm.

Market SessionTrading
Pre-opening Session
The pre-opening market session takes place to absorb heavy fluctuations in the stock market.
9:00 – 9:07 – Buy and sell orders can be placed during this time.
9:07- 9:12 – Buy and sell orders are matched during this time.
9:12 – 9:15 – The 3 minutes buffer time is given to stabilize the market and to calculate the opening price.
Market Hours 9:30 – 3:30The market opens at 9:30 am for all retail investors once the pre-market opening session absorbs the heavy price fluctuations.
POST Market hours
3:30 – 4:00
The brokers participate in the post-market hours to square off Intraday orders on behalf of the retail investors.
After Market hours
4:00 – 9:00
Aftermarket orders are executed at 9:15 am on the next morning and affect the open price of the shares as well.

Company Analysis

Never go for stocks with low stock prices without researching the company. Always do the fundamental analysis of the stock before buying the stocks for the long run. For instance – A company with a healthy balance sheet and good profit is always better than a company with bad financials and losses even though the share price is fairly low.

Fundamental analysis helps in narrowing down the right stocks. However, timing plays a crucial role in buying those shares and that’s where technical analysis comes into the picture. A good technical analysis of the stock predicts the right time to buy the stock.

A good investor is a combination of both fundamental and technical analysis.

Diversification Of Portfolio

The stock market is volatile and investing all your money in a particular sector is pretty risky. For instance – If you have invested in the majority of steel stocks and some policy changes lead to falling in the price of steel then your can risk losing all your money.

On the other hand, Diversifying your portfolio into Blue-chip stocks, High Dividend stocks and growth stocks can mitigate the risk of losing all your investments. SmallCase helps in diversifying your portfolio.

Tips For Safe Investing

Invest some amount into government stocks to overcome the fear of trading as they are very stable and generally offer higher dividends.

Invest only a small portion of your portfolio into penny stocks as they are very risky and volatile.

Invest in companies that are currently in the growth stage which can potentially give higher returns in the future.

Be aware of the market news and quarterly reports of the companies to invest wisely.

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